Five sentences to understand the heavyweight news of the People's Bank of China announcing plans to pay interest on digital yuan and the bearish impact on the crypto circle

1. Form evolution: Digital yuan officially transitions from “1.0 Electronic Cash” to “2.0 Interest-Bearing Asset.”

2. Stock competition: This is the central bank directly stepping in, initiating a “stock user competition” with traditional bank deposits, Yu’e Bao, and Yu’e Bao.

3. Foreign exchange reshaping: Enhance the attractiveness of the RMB, not only making you want to use it but also want to save it, stabilizing the exchange rate fundamentals.

4. International rivalry: Creating a sovereign-level “Interest-Bearing Stablecoin,” directly challenging US dollar dominance and its behind-the-scenes USDC/USDT.

5. Crypto market shift: Creating a “liquidity black hole” in the crypto market, which is both a dimensionality reduction attack and the ultimate endorsement of digital assets.

1. The leap from digital yuan 1.0 to 2.0
• Explanation: Previously, e-CNY was just M0 (cash), stored in wallets without generating interest. Now, with interest payments, it has acquired M1/M2 (deposits) attributes.
• Impact: Its security is sovereign-level (highest grade). Once it starts earning yields, it transforms from a “payment tool” into a “savings tool,” completing a qualitative change in financial attributes.

2. Confrontation with traditional banks, Alipay, Yu’e Bao
• Explanation: Previously, your money in banks or Yu’e Bao earned interest for intermediaries. Now, the central bank directly pays interest, bypassing commercial banks and payment giants.
• Impact: The “low-cost deposit” moat of banks is instantly leveled. If Yu’e Bao cannot offer higher premiums, large-scale fund flows will return to the central bank’s wallet. This is a true **“financial disintermediation”**.

3. Profound impact on foreign exchange and capital flows
• Explanation: Previously, RMB internationalization was difficult because the yield path for holding RMB was long.
• Impact: Now, e-CNY comes with interest, effectively allowing global users to directly hold “interest-bearing RMB bonds.” This will significantly enhance offshore RMB attractiveness, increase foreign capital retention, and provide solid support for the exchange rate.

4. International financial competition: Challenging US dollar stablecoins
• Explanation: Currently, global digital asset trading is anchored to US dollar stablecoins (USDT/USDC).
• Impact: The central bank’s move is creating an “official interest-bearing stablecoin.” If e-CNY can generate interest cross-border, it will become the preferred settlement method for global trade and AI agents, bypassing traditional US dollar clearing systems (SWIFT).

5. Pros and cons for the crypto circle
• Bearish: “Liquidity drain.” If e-CNY offers a risk-free sovereign yield of 3%, large amounts of idle funds in the crypto market (originally waiting in USDT, etc.) will flow back into e-CNY.
• Bullish: “Cognitive compliance.” The central bank has operationalized digital currency logic, forcing the crypto market to seek higher “real yields.”
• Impact: By 2026, mediocre DeFi projects will die out, and only high-quality assets (such as star projects in the SOL ecosystem) that can outperform central bank interest will survive.